Stop losses: The good, the bad, and the ugly

Should you use them?

Good Morning!   It's Money Monday, but instead of focusing on the enormous potential gains in penny stocks, I want to talk about something equally important…   Losses.   They're a part of trading. But I see many traders who jump into trades without considering their risk level for a trade.    That's a crucial mistake if you trade penny stocks…    Let's face it, these stocks are junk, and most — if not all — end up failing… Just like one of my top watches did on Friday. It had a nasty mid-morning sell-off.   If you didn't have a stop loss in place, you might've felt like a deer caught in the headlights…    All of a sudden, you're down HUGE, and you don't know what to do…    Should you take a loss and risk selling at the bottom? Do you wait for a bounce? Or do you bag-hold it and hope to get back to break-even?    Using a stop-loss can help you avoid all of those extra decisions when you're in a trade. And that can help you eliminate emotional mistakes.    But not everyone's a fan of stop-losses. So today I'll break down the good, the bad, and the ugly of using a stop-loss… Learn how to set risk levels for your trades here. The Good  Stop losses are an integral part of your trading plan — they're the key to smart trading.    You can either use 'hard' stops by inputting a stop-loss order as soon as you enter a position.    Or you can use 'mental' stops where you watch the stock and send your sell order when it hits your risk level — give or take a little.    Learn about different order types here.    You can do whatever you like…    But the problem with mental stops is it's easier to change your mind when in a trade. It can be tempting to give a stock 'more room to work.' Or lower your risk to the next area of support…   That's a dangerous game.  Just look at what happened if you gave SIGA Technologies, Inc. (NASDAQ: SIGA) 'a little more room to work' yesterday…  SIGA chart: 1-day, 1-minute candle — courtesy of StocksToTrade.com I told SteadyTrade Team members to watch it for a break above $13.50. We got that move and it made a 25-cent-per-share move. But if you were holding out for more and didn't have a hard stop, you got annihilated…    If you were using a mental stop, you might not have been fast enough to execute your trade.   Maybe you get a phone call, or you're busy at work, and you look away for one second…   Then it's too late.    So if you're new, consider using hard stops. It will mean one less decision you have to make when you're in a trade. And that can help you cut out emotions and the temptation to just hold a little longer… The Bad  The reason so many traders like to use mental stops over hard stops is that they've been burned when a stock reversed and headed higher after they're out of the trade. It happens…    Just look at my RCI Hospitality Holdings, Inc. (NASDAQ: RICK) example from Friday…  Even after some negative news hit, it reversed and made new daily highs. RICK chart: 1-day, 1-minute candle — courtesy of StocksToTrade.com I agree — selling at or near the bottom sucks. It's annoying and frustrating.    If that happens to you, watch this video to learn a technique that can prevent you from getting stopped out of trades early.    But one of my favorite sayings is, I'd rather be out and wishing I was in than be in and wishing I was out.    If you're over the PDT, you can always get back if you see another setup.    And if you're starting out under the PDT, using hard stops can help you build the discipline you'll need throughout your trading career.    It's better to build good habits at the beginning than be undisciplined and take huge losses...    Because after a few big losses, before you know it, your account is at $7.18 and you're out of the game for good... The Ugly Not using a stop, or not sticking to your stops, is one of the main reasons 90% of traders lose.    So before you think about bag-holding a losing position, ask yourself if that's going to get you where you want to be. Is bag holding that stock going to help you reach your trading goals?   No, it's not. It's going to eat away at you and hold you hostage to your bad decisions.    I know losses are tough. They take a chunk out of your account and maybe a chunk of your confidence...    But taking a small loss is much better than blowing up and missing out on the opportunity to give trading a real shot.    Finding success in trading is possible. Look at me, I'm just an average guy with average intelligence ... Most traders are. But you've gotta stick it out and do the hard work.    Sometimes the hardest thing is cutting a loss.    If you need help with finding the right risk levels for your trades, consider subscribing to my Daily Market Profits alerts.    I give subscribers my number one watch each morning with an entry, goal, and risk level for my trade idea. It can help you get an idea of how to plan your own trades. Because I don't want you to depend on me forever...    I want to teach you a process you can use and refine over time.   If you're ready for a full educational trading experience with twice daily webinars, worksheets, and resources — apply to join the SteadyTrade Team.    I'm here for ya.    Have a great day everyone. See you back here on Money Monday.    Tim Bohen Lead Trainer, StocksToTrade sponsored Learn to Trade From Anywhere | Engage in Chat | Live a Life of Freedom The SteadyTrade Team fully immerses you in the spirit of the 'work from anywhere' trader.    Apply For The SteadyTrade Team Today sponsored 20 Stocks… Picked By Proprietary "One Click Stock Picker" Traders have seen stocks move 35%, 72% and 275%+ within a day, by replacing shady "mainstream" watchlists     [Watch Now] Recommended Membership Gifts ACCESS NOW: Click to activate these complimentary membership gifts and receive daily market intel. To The Moon Report Weekly Stock & Crypto Watchlist Stock Market Safety Course By Millionaire Trader Tim Sykes   Click Here to Unsubscribe   (As an Amazon Associate, we earn from qualifying purchases.)   13809 Research Boulevard, Suite 500, Austin, TX 78750   *Please note that these kinds of trading results are not typical. Most traders lose money. It takes years of dedication, hard work, and discipline to learn how to trade, and individual results will vary. Trading is inherently risky. Before making any trades, remember to do your due diligence and never risk more than you can afford to lose.   This is for informational purposes only as StocksToTrade is not registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund.   StocksToTrade cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. 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